EXECUTION ORIGINAL
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AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER
BY AND AMONG
GOLUB ASSOCIATES INCORPORATED
CATALOG ACQUISITION CORP.,
AND
SPECIALTY CATALOG CORP.
DATED JANUARY 18, 2000
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER......................................................................................1
RECITALS..........................................................................................................1
ARTICLE I.........................................................................................................1
THE MERGER.....................................................................................................1
1.1 The Merger.............................................................................................1
1.2 Company Action.........................................................................................1
1.3 Effects of the Merger..................................................................................2
1.4 Consummation of the Merger.............................................................................2
1.5 Certificate of Incorporation; Bylaws; Directors and Officers...........................................2
1.6 Conversion of Securities...............................................................................2
1.7 Company Stock Options and Related Matters..............................................................3
1.8 Dissenting Shares......................................................................................3
1.9 Exchange of Certificates...............................................................................4
1.10 Supplementary Action...................................................................................5
1.11 Lost, Stolen or Destroyed Company Certificates.........................................................5
ARTICLE II........................................................................................................5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................................5
2.1 Organization and Qualification.........................................................................5
2.2 Certificate of Incorporation; Bylaws; and Stock Transfer Records.......................................6
2.3 Capitalization of the Company..........................................................................6
2.4 Corporate Power, Authorization and Enforceability......................................................7
2.5 No Conflict; Required Filings and Consents.............................................................7
2.6 SEC Reports; Financial Statements......................................................................8
2.7 No Default; Violation; Dispute.........................................................................8
2.8 Compliance with Law....................................................................................9
2.9 [RESERVED].............................................................................................9
2.10 Absence of Certain Changes.............................................................................9
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2.11 No Undisclosed Liabilities.............................................................................9
2.12 Litigation; Claims.....................................................................................9
2.13 ERISA.................................................................................................10
2.14 Tax Returns and Reports...............................................................................12
2.16 Disclosure Documents..................................................................................13
2.17 Material Agreements...................................................................................14
2.18 Environmental Matters.................................................................................14
2.19 Insurance.............................................................................................15
2.20 Absence of Certain Business Practices.................................................................15
2.21 Takeover Laws.........................................................................................15
2.22 [RESERVED]............................................................................................15
2.23 [RESERVED]............................................................................................15
2.24 Board Recommendation..................................................................................15
2.25 Disclosue.............................................................................................15
2.26 Brokers and Finders...................................................................................16
ARTICLE III......................................................................................................16
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER........................................................16
3.1 Organization and Qualification........................................................................16
3.2 Corporate Power, Authorization and Enforceability.....................................................16
3.3 No Conflict; Required Filings and Consents............................................................16
3.4 Board Approval........................................................................................17
3.5 Brokers and Finders...................................................................................17
3.6 Disclosure Documents..................................................................................17
3.7 Financing.............................................................................................27
ARTICLE IV.......................................................................................................18
COVENANTS.....................................................................................................18
4.1 Conduct of Business by the Company....................................................................18
4.2 Access to Information; Confidentiality................................................................20
4.3 Preparation of Proxy Statement; Stockholders Meeting; Schedule 13E-3..................................22
4.4. [RESERVED]..................................................................ERROR! BOOKMARK NOT DEFINED.
4.5. No Solicitation by the Company........................................................................23
4.6 Public Announcements..................................................................................24
4.7 Notification of Certain Matters.......................................................................24
4.8 Officers' and Directors' Indemnification; Insurance...................................................25
4.9 Additional Agreements.................................................................................26
4.10 Company Indebtedness..................................................................................26
4.11 Other Actions by the Company..........................................................................26
4.12 Litigation Cooperation................................................................................27
4.13 Future Filings........................................................................................27
4.14 Board Action Relating to Stock Option Plans...........................................................27
4.15 Company Actions Relating to Tax Matters...............................................................27
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ARTICLE V........................................................................................................29
CONDITIONS OF MERGER..........................................................................................29
5.1 Conditions to the Obligations of Each Party to Effect the Merger......................................29
5.2 Conditions Precedent to Parent's and Purchaser's Obligations..........................................29
5.3 Conditions to Obligations of the Company..............................................................30
ARTICLE VI.......................................................................................................32
TERMINATION, AMENDMENT AND WAIVER.............................................................................32
6.1 Termination...........................................................................................32
6.2 Procedure and Effect of Termination...................................................................33
6.3 Fees and Expenses.....................................................................................33
6.4 [RESERVED]............................................................................................33
6.5 Amendment.............................................................................................33
6.6 Waiver................................................................................................33
ARTICLE VII......................................................................................................35
DEFINITIONS...................................................................................................35
ARTICLE VIII.....................................................................................................36
MISCELLANEOUS.................................................................................................36
8.1 Severability..........................................................................................36
8.2 Notices...............................................................................................36
8.3 Headings..............................................................................................36
8.4 Representations and Warranties, etc...................................................................37
8.5 Miscellaneous.........................................................................................37
8.6 Attorneys Fees........................................................................................37
8.7 Governing Law.........................................................................................37
8.8 Non-Survival of Representations and Warranties........................................................37
EXHIBITS......................................................................................................39
Exhibit A Stockholders Agreement dated December 2, 1999...................................................39
Exhibit B Form of Company Option Agreement................................................................39
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AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER
THIS AGREEMENT AND PLAN OF RECAPITALIZATION AND MERGER (the
"Agreement") is made and entered into as of this 18th day of January, 2000, by
and among GOLUB ASSOCIATES INCORPORATED, a New York corporation ("Parent"),
CATALOG ACQUISTION CORP., a Delaware corporation and a wholly-owned subsidiary
of Parent ("Purchaser"), and SPECIALTY CATALOG CORP., a Delaware corporation
(the "Company").
RECITALS
The Boards of Directors of Parent, Purchaser and the Company each deems
it advisable and in the best interests of Parent, Purchaser and the Company and
their respective stockholders that a merger and recapitalization be effected
through the merger of the Purchaser with and into the Company (the "Merger")
upon the terms and subject to the conditions set forth herein and in accordance
with the Delaware General Corporation Law (the "DGCL"). The Boards of Directors
of Parent and Purchaser, and the Parent as the sole stockholder of Purchaser,
have adopted this Agreement. The Board of Directors of the Company has approved
this Agreement and has resolved, subject to its fiduciary duties under
applicable law, to recommend to the stockholders of the Company to vote in favor
of this Agreement.
As a condition and inducement to Parent's willingness to enter into
this Agreement, certain stockholders of the Company, who include certain of the
directors of the Company and its Subsidiaries (as defined below) and who hold,
in the aggregate, more than 35% of the outstanding shares of Common Stock, par
value $.01, of the Company entered into a Stockholders Agreement dated December
2, 1999, a copy of which is attached hereto as Exhibit A (the "Stockholder
Agreement").
Substantially concurrent herewith and as a condition and inducement to
Parent's and Purchaser's willingness to enter into this Agreement, the Company
has entered into an Option Agreement in the form of Exhibit B hereto (the
"Company Option Agreement").
Certain capitalized terms used in this Agreement are defined in Article
VII hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Parent, Purchaser and
Company hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.4
hereof), in accordance with this Agreement and Section 251 of the DGCL,
Purchaser shall be merged with and into the Company, the separate existence of
the Purchaser (except as may be continued by operation of law) shall cease, and
the Company shall continue as the surviving corporation under the corporate name
it possesses immediately prior to the Effective Time. The Company after the
Merger sometimes is referred to herein after as the Surviving Corporation (the
"Surviving Corporation).
1.2 Company Action. The Company hereby consents to the Merger and
represents that each of the Company's Board of Directors (the "Board of
Directors") and the Special Committee of the Board of Directors (the "Special
Committee"), at a meeting duly called and held, has (i) determined,
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without any member voting there against that this Agreement and the transactions
contemplated hereby, including the Merger (as defined in Section 1.1), are in
the best interests of the Company and its stockholders, (ii) approved this
Agreement, without any member voting against, and the transactions contemplated
hereby, including the Merger, which approvals, and prior actions taken by such
Board immediately prior to the execution of the Letter of Intent, are sufficient
to render entirely inapplicable to the Merger, Parent and Purchaser, as of the
date hereof, the provisions of Section 203 of the DGCL and (iii) resolved to
recommend approval and adoption of this Agreement and the Merger by its
stockholders.
1.3 Effects of the Recapitalization and Merger. At the Effective Time,
the effect of the Merger shall be as provided in the applicable provisions of
this Agreement and as set forth in Section 251 of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
rights and property of the Company and the Purchaser (the "Constituent
Corporations") shall vest in the Surviving Corporation, and all debts and
liabilities of the Company and the Purchaser shall become the debts and
liabilities of the Surviving Corporation.
1.4 Consummation of the Recapitalization and Merger. Unless this
Agreement shall have been terminated and the transactions herein contemplated
shall have been abandoned pursuant to Section 6.1, in the event of, and as soon
as is practicable after, the satisfaction or waiver of the conditions set forth
in Article V hereof the parties hereto will cause the Merger to be consummated
by filing with the Secretary of State of the State of Delaware, a certificate of
merger or other appropriate documents, executed in accordance with the relevant
provisions of the DGCL (the time of confirmation of such filing or such later
time as is specified in such certificate of merger being the "Effective Time").
Contemporaneous with the filing referred to in this Section 1.4, a closing (the
"Closing") will be held at the offices of Lane Altman & Owens LLP, 101 Federal
Street, Boston, Massachusetts 02110 or at such other location as the parties may
establish for the purpose of confirming all the foregoing. The date and the time
of such Closing are referred to as the "Closing Date."
1.5 Certificate of Incorporation; Bylaws; Directors and Officers. The
Certificate of Incorporation and Bylaws of the Surviving Corporation shall be
the Certificate of Incorporation and Bylaws of the Company, as in effect
immediately prior to the Effective Time, until thereafter amended as provided
therein and under the DGCL. The directors of Purchaser immediately prior to the
Effective Time will be the initial directors of the Surviving Corporation, and
the officers of the Company immediately prior to the Effective Time will be the
initial officers of the Surviving Corporation, in each case until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
1.6 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of the Purchaser, the Company, the
Surviving Corporation or the holder of any of the following securities:
(a) Each share of Common Stock, $.01 par value per share of the Company
(the "Shares"), issued and outstanding immediately prior to the Effective Time
(other than Shares to be cancelled pursuant to Section 1.6(b) hereof, Shares
held by the continuing shareholders set forth on Schedule 1.6(a) hereto, as such
Schedule may be amended by Parent and Purchaser from time to time, and, subject
to Section 1.6(d) and Section 1.8 hereof, any Dissenting Shares (as hereinafter
defined)), shall be cancelled and extinguished and be automatically converted
into and become a right to receive $5.00 per share in cash (the "Per Share
Merger Consideration") upon surrender in the manner provided in Section 1.9 of
the certificate that evidenced the Shares (the "Certificate").
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(b) Each Share which is issued and held in the treasury of the Company
immediately prior to the Effective Time or issued and outstanding and owned by
the Company or by the Purchaser, shall be cancelled and retired, and no payment
shall be made with respect thereto.
(c) Each share of capital stock of the Purchaser issued and outstanding
immediately prior to the Effective Time shall be converted into capital stock of
the Surviving Corporation with the same rights and terms as immediately prior to
the Merger, except as otherwise provided by agreement between Purchaser and its
capital stock holders.
(d) The holders of Dissenting Shares (as hereinafter defined), if any,
shall be entitled to payment for such Shares only to the extent permitted by and
in accordance with the provisions of the DGCL; provided, however, that if, in
accordance with the applicable provisions of the DGCL, any holder of Dissenting
Shares shall forfeit such right to payment of the fair cash value of such
Shares, such Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Time, the right to receive the
Per Share Merger Consideration provided in Section 1.6(a).
1.7 Company Stock Options and Related Matters. Immediately prior to the
Effective Time, and except as may be set forth on Schedule 1.7 of the Company's
Disclosure Letter or otherwise consented to by the Purchaser, each outstanding,
unexercised option, warrant or other right to purchase the Company's Common
Stock (an "Option"), including but not limited to Options to purchase Shares
heretofore granted under the Company's 1996 Stock Incentive Plan, as amended
(the "Company Stock Option Plan"), whether or not exercisable, shall either have
been surrendered by the holders, or shall by its terms terminate and be
cancelled by the Company and each holder of a cancelled Option shall be paid
from the Surviving Corporation as of the Effective Time, in cancellation and
settlement of such Option, a cash payment in an amount equal the product of (a)
the excess, if any, of (x) the Merger Consideration over (y) the per Share
exercise price of such Option, times (b) the number of Eligible Shares (as
defined below) subject to such Option. Such cash payment shall be net of any
required withholding taxes. The term "Eligible Shares" shall mean the aggregate
number of Shares that shall then be subject to purchase under any option which
shall be vested and exercisable as of the Effective Time. The Company's
obligation to make any such cash payment (1) shall be subject to the obtaining
of any necessary consents of optionees to the cancellation of such Options, in
form and substance satisfactory to Purchaser, and (2) shall not require any
action which violates the Company Stock Option Plan.
1.8 Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, Shares issued and outstanding immediately prior to the Effective
Time and held by a holder (a "Dissenting Stockholder"), if any, who has the
right to demand, and who properly demand, an appraisal of such shares in
accordance with Section 262 of the DGCL or any successor provision ("Dissenting
Shares") shall not be converted into a right to receive the Merger Consideration
unless such Dissenting Stockholder fails to perfect or otherwise loses or
withdraws such Dissenting Stockholder's right to such appraisal, if any.
Provided the holder of any Dissenting Shares complies with the provisions of the
DGCL, such holder shall have with respect thereto solely the appraisal rights
provided under Section 262 of the DGCL. If, after the Effective Time, such
Dissenting Stockholder fails to perfect or otherwise loses or withdraws any such
right to appraisal, each such share of such Dissenting Stockholder shall be
treated as a share that had been converted as of the Effective Time into the
right to receive the Merger Consideration in accordance with this Section 1.8.
The Company shall give prompt notice to Purchaser of any demands received by the
Company for appraisal of any Dissenting Shares, and Purchaser shall have the
right to participate in and direct all negotiations and proceedings with respect
to such demands. The Company shall not, except with the prior written consent of
Purchaser, which consent shall not be unreasonably withheld, make any payment
with respect to, or settle or offer to settle, any such demands.
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1.9 Exchange of Certificates.
(a) Prior to the Effective Time, a bank or trust company to be
designated by the Purchaser (the "Exchange Agent") shall act as exchange agent
in effecting the exchange of the Per Share Merger Consideration for Certificates
which, prior to the Effective Time, represented Shares entitled to payment
pursuant to Section 1.6 hereof. At least one business day prior to the Effective
Time, the Parent or the Purchaser shall deposit with the Exchange Agent the
aggregate Per Share Merger Consideration necessary to make the payments
contemplated hereby on a timely basis (the "Deposit Amount") in trust for the
benefit of the holders of Certificates. Pending distribution pursuant to this
Section 1.9(a) of the Deposit Amount deposited with the Exchange Agent, the
Surviving Corporation may direct the Exchange Agent to invest such Deposit
Amount, provided that such investments (i) shall be obligations of or guaranteed
by the United States of America, in commercial paper obligations receiving the
highest rating from either Moody's Investors Services, Inc. or Standard & Poor's
Ratings Services, a division of The McGraw Hill Companies, Inc., or in
certificates of deposit, bank repurchase agreements or bankers acceptances of
commercial banks with capital exceeding $500,000,000 (collectively "Permitted
Investments") or in money market funds which are invested solely in Permitted
Investments and (ii) shall have maturities that will not prevent or delay
payments to be made pursuant to this Section 1.9(a). Upon the surrender of each
such Certificate and the issuance and delivery by the Exchange Agent of the Per
Share Merger Consideration in exchange therefor, such Certificate shall
forthwith be cancelled. Until so surrendered and exchanged, each such
Certificate (other than Certificates representing Shares held by the Company or
the Purchaser and by Dissenting Shares) shall represent solely the right to
receive the Per Share Merger Consideration, without interest, multiplied by the
number of Shares represented by such Certificate. Promptly after the Effective
Time, the Exchange Agent shall mail to each record holder of Certificates which
immediately prior to the Effective Time represented Shares a form of letter of
transmittal and instructions for use in surrendering such Certificates and
receiving the Per Share Merger Consideration therefor. Upon the surrender to the
Exchange Agent of such an outstanding Certificate together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder shall receive the Per Share Merger Consideration,
without any interest thereon. If any Per Share Merger Consideration is to be
paid to a name other than the name in which the Certificate representing Shares
surrendered in exchange therefor is registered, it shall be a condition to such
payment or exchange that the Person requesting such payment or exchange shall
pay to the Exchange Agent any transfer or other taxes required by reason of the
payment of such Per Share Merger Consideration to a name other than that of the
registered holder of the Certificate surrendered, or such Person shall establish
to the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a holder of Shares for any Per Share Merger
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(b) The Surviving Corporation shall not be entitled to the return of
any amount in the possession of the Exchange Agent relating to the transactions
described in this Agreement until the date which is 180 days after the Effective
Time. Thereafter, each holder of a Certificate representing a Share may
surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in exchange
therefor the Per Share Merger Consideration, without any interest thereon, but
shall have no greater rights against the Surviving Corporation than may be
accorded to general creditors of the Surviving Corporation.
(c) At and after the Effective Time, the holders of Certificates to be
exchanged for the Per Share Merger Consideration pursuant to this Agreement
shall cease to have any rights as stockholders of the Company except for the
right to surrender such holder's Certificates in exchange for payment of the Per
Share Merger Consideration, and after the Effective Time there shall be no
transfers on the stock transfer books of the Surviving Corporation of the Shares
which were outstanding immediately prior to
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the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Exchange Agent, they shall be cancelled and
exchanged for the Per Share Merger Consideration, as provided in this Article I,
subject to applicable law in the case of Dissenting Shares.
(d) The provisions of this Section 1.9 shall also apply to Dissenting
Shares that lose their status as such, except that the obligations of the
Exchange Agent under this Section 1.9 shall commence on the date of loss of such
status.
1.10 Supplementary Action. If at any time after the Effective Time, any
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of either the Company or
Purchaser, or otherwise to carry out the provisions of this Agreement, the
officers and directors of the Surviving Corporation are hereby authorized and
empowered, in the name of and on behalf of the Company and Purchaser, to execute
and deliver any and all things necessary or proper to vest or to perfect or
confirm title to such property or rights in the Surviving Corporation, and
otherwise to carry out the purposes and provisions of this Agreement.
1.11 Lost, Stolen or Destroyed Company Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange or such lost, stolen or destroyed Certificates, upon making of
an affidavit of the fact by the holder thereof, certificates representing such
shares of Company Common Stock to be exchanged in the manner described in this
Article I; provided, however, that Parent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to indemnify Parent and Purchaser against any
claim that may be made against Parent, Purchaser the Surviving Corporation or
the Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the representations and warranties set forth
herein, except as described in the Company Disclosure Letter furnished by the
Company to the Parent prior to the execution of this Agreement (the "Company
Disclosure Letter"), with all such exceptions to be referenced to a section of
this Article II or to otherwise be clearly applicable to representations hereof
not so referenced (notwithstanding any additional reference or failure to make
any reference to the Company Disclosure Schedule in this Article II of this
Agreement, the information set forth on the Company Disclosure Schedule shall be
deemed to be exceptions to the representations and warranties in this Article
II) corresponding to the Sections set forth below. Where a representation or
warranty is modified by excluding exceptions which do not, and are not
reasonably likely to, cause a Material Adverse Effect, the Company shall use
good faith efforts to identify on such Disclosure Letter any such exceptions
which are known to the Company; provided, however that the failure to disclose
such exceptions shall not be deemed a breach of this Agreement.
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each Subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. The Company and its Subsidiaries have all requisite corporate
power and authority to own, operate and lease their properties and to carry on
their business as it is now being conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign corporation, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, other than in jurisdictions where the failure to be so qualified,
individually and in the aggregate, has not had and would not reasonably be
expected to have a
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Material Adverse Effect. Other than the Company's ownership interest in its
Subsidiaries, the Company has no direct or indirect equity interest in any
partnership, corporation, limited liability company, joint venture, business
association or other entity.
2.2 Certificate of Incorporation; Bylaws; and Stock Transfer Records.
The Company has made available to the Parent prior to the date of this Agreement
complete and correct copies of (i) the Certificate of Incorporation (or other
charter document) and By-laws of the Company and each of its Subsidiaries, (ii)
a shareholder list of each of the Company and each of its Subsidiaries and (iii)
all stock certificates representing any of the issued and outstanding capital
stock of each of the Company's Subsidiaries, and in each case such copies are
accurate and complete as of the date of this Agreement.
2.3 Capitalization of the Company.
(a) As of the date of this Agreement, the authorized capital stock of
the Company consists of (i) 1,000,000 shares of Preferred Stock, par value $.01
per share, of which none are issued and outstanding, and (ii) 10,000,000 shares
of Common Stock, par value $.01 per share, of which 4,351,386 Shares are issued
and outstanding. Except for (i) the rights created pursuant to this Agreement,
the Company Stock Option Plan and the Company Option Agreement and (ii) as set
forth in Section 1.7 and 2.3 of the Company Disclosure Letter, there are no
other options, warrants, calls, rights, commitments or agreements of any
character to which the Company is a party or by which it is bound obligating the
Company to issue, sell, deliver, repurchase or redeem or cause to be issued,
sold, delivered, repurchased or redeemed any shares of capital stock of, or
equity interests in, the Company. All outstanding Shares are, and all Shares
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be, duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights or rights of first refusal. None of the Company or any of its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of the Company or any of its Subsidiaries, respectively, as a
result of the transactions contemplated by this Agreement. The Company has no
stockholder rights plan or agreement in force providing for the issuance to
holders of Shares of rights to purchase or receive stock, cash or other assets
upon the acquisition or proposed acquisition of Shares by a Person (a "Rights
Plan"), nor has the Company's Board of Directors or stockholders ever adopted a
Rights Plan.
(b) All of the Company's Subsidiaries are listed in Section 2.3 of the
Company Disclosure Letter. Except as set forth in the Company's Annual Report on
Form 10-K for the fiscal year ended January 2, 1998 (the "1998 10-K") or Section
2.3 of the Company Disclosure Letter, the Company owns all of the outstanding
capital stock of its Subsidiaries, and such stock and all other Company-owned
property, whether real or personal, is free and clear of any liens, security
interests, pledges, agreements, claims, charges or encumbrances of any nature
whatsoever ("Encumbrances"), except for any Encumbrances securing the Company's
obligations to BankBoston, N.A. under its line of credit (or any successor line
of credit) and any other Encumbrances that are not material to the Company and
the Subsidiaries taken as a whole. Except as set forth in Section 2.3 of the
Company Disclosure Letter, there are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries may be bound with respect to the
voting of the capital stock of the Company or any of the Company's Subsidiaries.
Except as set forth in Section 2.3 of the Company Disclosure Letter, there are
no options, warrants, calls, rights, commitments, or agreements of any character
to which any of the Company's Subsidiaries is a party or by which any of the
Company's Subsidiaries is bound obligating such Subsidiary to issue, sell,
deliver, repurchase or redeem, or caused to be issued, sold, delivered,
repurchased or redeemed, any shares of capital stock of, or equity interests in,
such Subsidiary. All of the outstanding capital stock of each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and issued free of preemptive rights or rights of first refusal.
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2.4 Corporate Power, Authorization and Enforceability. The Company has
all requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder and to consummate all the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Company, the performance by the Company of its obligations hereunder and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Company's Board of Directors and no other
corporate action on the part of the Company is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than,
with respect to the Merger, the approval and adoption of this Agreement by
stockholders holding a majority of the outstanding Shares entitled to vote
thereon). This Agreement has been duly executed and delivered by the Company and
is a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the effect of any applicable
bankruptcy, moratorium, insolvency, reorganization or other similar law
affecting the enforceability of creditors' rights generally and to the effect of
general principles of equity which may limit the availability of remedies
(whether in a proceeding at law or in equity).
2.5 No Conflict; Required Filings and Consents.
(a) Assuming satisfaction of any applicable requirements referred to in
Section 2.5(b) below, the execution and delivery by the Company of this
Agreement, the compliance by the Company with the provisions hereof and the
consummation by the Company of the transactions contemplated hereby:
(A) will not conflict with or violate any statute, law, ordinance,
rule, regulation, order, writ, judgment, award, injunction, decree or ruling
applicable to the Company or any of its Subsidiaries or any of their properties,
or conflict with, violate or result in any breach of or constitute a default (or
an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, cancellation or
acceleration of, or the loss of a benefit under, or result in the creation of a
lien, security interest, charge or encumbrance on any of the properties or
assets of the Company or any of its Subsidiaries, including pursuant to (i) the
Certificate of Incorporation (or other charter document) or Bylaws of the
Company or any of its Subsidiaries, or (ii) any contract, lease, agreement,
note, bond, mortgage, indenture, deed of trust, or other instrument or
obligation, or any license, authorization, permit, certificate or other
franchise, other than such conflicts, violations, breaches, defaults, losses,
rights of termination, amendment, cancellation or acceleration, liens, security
interests, charges or encumbrances as to which requisite waivers have been
obtained or which in either case individually or in the aggregate have not had
and would not reasonably be expected to have a Material Adverse Effect; and
(B) subject to shareholder dissenters' rights, do not and will not
result in any grant of rights to any other party under the Certificate of
Incorporation (or other charter document) or Bylaws of the Company or any of its
Subsidiaries or restrict or impair the ability of the Parent or any of its
Subsidiaries to vote, or otherwise exercise the rights of a stockholder with
respect to shares of the Company or any of its Subsidiaries that may be directly
or indirectly acquired or controlled by them.
(b) Other than in connection with or in compliance with the provisions
of the DGCL, the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the "blue sky" laws of various states, approvals, registrations, permits,
licenses, authorizations, waivers or consents required to be obtained under
applicable state or local laws, including but not limited to NASDAQ rules,
applicable state takeover laws, the premerger notification requirement of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), if applicable to the transactions contemplated hereby, and the filing and
recordation of the Certificate of merger as required under the DGCL
(collectively, "Regulatory
7
Consents"), (i) the Company is not required to submit any notice, report,
registration, declaration or other filing with any federal, state or local
government, court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (collectively, "Governmental
Entities"), in connection with the execution or delivery of this Agreement by
the Company or the performance by the Company of its obligations hereunder or
the consummation by the Company of the transactions contemplated by this
Agreement and (ii) no waiver, consent, approval, order or authorization of any
Governmental Entity is required to be obtained in connection with the execution
or delivery of this Agreement by the Company or the performance by the Company
of its obligations hereunder or the consummation by the Company of the
transactions contemplated by this Agreement, other than such notices, reports,
registrations, declarations, filings, waivers, consents, approvals, orders, or
authorizations, the absence of which would not, individually and in the
aggregate, subject the Company or its Subsidiaries to any criminal penalties or
otherwise reasonably be expected to have a Material Adverse Effect.
2.6 SEC Reports; Financial Statements. Company has filed all required
reports, schedules, forms, statements and other documents with the Securities
and Exchange Commission (the "SEC") from 1996 through the date hereof
(collectively, the "SEC Reports"). The financial statements contained in the SEC
Reports (or incorporated therein by reference) and the consolidated financial
statements of the Company and its Subsidiaries for the fiscal year ended January
2, 1999 included in the 1998 10-K and for the quarter ended April 3, 1999
included in the Company's Quarterly Report on Form 10-Q for the quarter ended
April 3, 1999 ("March 1999 10-Q") and for the quarter ended July 2, 1999
included in the Company's Quarterly Report on Form 10-Q for the quarter ended
July 2, 1999 (the "June 1999 10-Q") and for the quarter ended October 2, 1999
included in the Company's Quarterly Report on Form 10-Q for the quarter ended
October 2, 1999 (the "October 10-Q")(collectively, the "Financial Statements"),
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved ("GAAP") (except
as may be indicated in the notes or schedules thereto and except, in the case of
the unaudited interim statements, as may be permitted under Form 10-Q of the
Exchange Act) and present fairly in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows as
of the dates and for the fiscal periods indicated therein (subject, in the case
of unaudited interim financial statements, to normal year-end adjustments). On
the date of filing thereof, and as of the date hereof, each SEC Report filed
with the SEC complied in all material respects with the then applicable
requirements of the Exchange Act and the Securities Act of 1933, as amended (the
"Securities Act"), and the rules and regulations of the SEC promulgated
thereunder and do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the Company's Subsidiaries is required to file any
statements or reports with the SEC.
2.7 No Default; Violation; Dispute. Neither the Company nor any of its
Subsidiaries is in default or violation, and, to the Company's knowledge, no
claims exist with respect to (and no event has occurred which with or without
notice, the lapse of time or the happening or occurrence of any other event
would constitute a default or violation or claim) any term, condition or
provision of (i) its Certificate of Incorporation (or other charter document) or
Bylaws, or (ii) except as set forth in Section 2.7 of the Company Disclosure
Letter, any contract, lease, agreement, license, note, bond, employee benefit
agreement or plan, arrangement under which it owns or leases real or personal
property, mortgage, indenture, deed of trust or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which the
Company or its Subsidiaries or any of their properties or assets may be bound
(nor to the knowledge of the Company is any other party thereto in breach
thereof or default thereunder), except in the case of this clause (ii) for any
defaults, violations or claims that individually and in the aggregate would not
have a Material Adverse Effect.
8
2.8 Compliance with Law. Except as set forth in Section 2.8 of the
Company Disclosure Letter, each of the Company and its Subsidiaries is in
compliance, and has conducted its respective businesses so as to comply with,
all statutes, laws, ordinances, rules, regulations, permits and approvals
applicable to its operations, except for violations which, individually and in
the aggregate, do not and insofar as reasonably can be foreseen in the future
would not have a Material Adverse Effect. Except as disclosed in the SEC
Reports, as of the date hereof no investigation or review by any Governmental
Entity with respect to the Company, any of its Subsidiaries or any property
owned or leased by the Company or any of its Subsidiaries is pending or, to the
knowledge of the Company, threatened, except for any investigation or review
that would not individually and in the aggregate have a Material Adverse Effect.
2.9 [RESERVED]
2.10 Absence of Certain Changes. As of the date of this Agreement,
except as disclosed in Section 2.10 of the Company Disclosure Letter, or in the
1998 10-K, March 1999 10-Q, June 1999 10-Q or the October 10-Q, since December
31, 1998, the Company and its Subsidiaries have conducted their business in the
ordinary course consistent with past practice and have not taken any of the
actions set forth in paragraphs (a)(i) through (xiv) of Section 4.1, and there
has not been any occurrence, including the commencement or to the knowledge of
the Company, threat of any action, suit, investigation or proceeding against the
Company or its Subsidiaries, that has had or would reasonably be expected to
have a Material Adverse Effect, other than changes relating to or arising out of
the economy in general or the industries of the Company and its Subsidiaries in
general and not specifically relating to the Company or any of its Subsidiaries,
or otherwise agreed to in writing by Parent or Purchaser.
2.11 No Undisclosed Liabilities. Except for liabilities and obligations
incurred since December 31, 1998 in the ordinary course of business, liabilities
and obligations incurred in connection with this Agreement or any of the
agreements to be entered into pursuant to this Agreement, and liabilities and
obligations identified in Section 2.11 of the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries has any liabilities or obligations of
any nature whatsoever, including guarantees or other similar obligations,
(whether absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise), other than recognized or disclosed in the Financial Statements or
disclosed in the 1998 10-K or March 1999 10-Q, June 1999 10-Q or October 10-Q,
or which individually or in the aggregate would not have a Material Adverse
Effect.
2.12 Litigation; Claims. Section 2.12 of the Company Disclosure Letter
includes (i) a list of all litigation pending against the Company as of the date
hereof, (ii) all material threatened litigation and material claims of any kind
known by the Company as of the date hereof, and (iii) all claims made or
threatened, in writing, regarding losses of any kind arising out of product
liability or defective merchandise claims, employee disputes and labor actions
or attempts to organize employees into one or more bargaining units. The Company
has made available to Parent correct and complete copies of all audit inquiry
response letters prepared by its counsel for the Company's auditors in
connection with the last completed audit of the Company's financial statements
and any such correspondence since the date of the last such audit. As of the
date of this Agreement, there are no actions, suits or proceedings pending or,
to the knowledge of the Company, threatened against the Company arising out of
or in any way related to this Agreement, the Merger or any of the transactions
contemplated hereby or thereby
2.13 ERISA.
(a) Section 2.13 of the Company Disclosure Letter lists each
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all other written or oral
plans, programs, arrangements or agreements involving direct or
9
indirect compensation (including any employment agreements entered into between
the Company or any of its Subsidiaries and any employee or former employee (who
had been employed by the Company within the last five years) of the Company or
any of its Subsidiaries, but excluding worker's compensation, unemployment
compensation and other government-mandated programs) currently or previously
maintained, contributed to or entered into by the Company or any of its
Subsidiaries or any ERISA Affiliate thereof for the benefit of any employee or
former employee of or current or former service provider to the Company or any
of its Subsidiaries under which the Company or any of its Subsidiaries or any
ERISA Affiliate thereof has or may have any present or future obligation or
liability (collectively, the "Company Employee Plans"). Company Employee Plans
include, but are not limited to each employment, severance or other similar
contract, policy and each plan or arrangement (written or oral) providing for
insurance coverage (including any self-insured arrangements), vacation policy,
severance or severance-type benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is entered into, maintained or
contributed to, as the case may be, by the Company or any of its Subsidiaries,
and (ii) covers any employee or former employee of or other current or former
service provider to the Company or any of its Subsidiaries. For purposes of this
Section 2.13, "ERISA Affiliate" shall mean any entity which is a member of (i) a
"controlled group of corporations," as defined in Section 414(b) of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) a group of entities under
"common control," as defined in Section 414(c) of the Code or (iii) an
"affiliated service group," as defined in Section 414(m) of the Code or treasury
regulations promulgated under Section 414(o) of the Code, any of which includes
the Company or any of its Subsidiaries. Section 2.13 of the Company Disclosure
Letter identifies the Company Employee Plans which individually or collectively
constitute an "employee pension benefit plan," as defined in Section 3(2)of
ERISA (collectively, the "Company Pension Plans") and the company employee Plans
which individually or collectively constitute an "employee welfare benefit plan"
as defined in Section 3(1) of ERISA.
(b) No Company Pension Plan is subject to Title IV of ERISA, Part 3of
Title I of ERISA or Section 412 of the Code. No Company Employee Plan
constitutes or has since the enactment of ERISA constituted a "multiemployer
plan," as defined in Section 3(37) of ERISA. Nothing done or omitted to be done
and no transaction or holding of any asset under or in connection with any
Company Employee Plan has or is likely to make the Company or any of its
Subsidiaries or any officer, employee, or director thereof or any fiduciary of
such Company Employee Plan subject to any material liability as a result of a
violation of Title I of ERISA or liable for any material tax pursuant to Section
4975 of the Code.
(c) Each Company Pension Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, except to the extent that the requirements for
qualification may be satisfied by adopting retroactive amendments under Section
401(b) of the Code and the regulations thereunder. Each trust forming a part of
a Company Pension Plan is exempt from tax pursuant to Section 501(a) of the
Code. Each such Company Pension Plan, directly or through its third party
sponsor, is the subject of a favorable determination letter from the Internal
Revenue Services that the form of the Plan satisfies Section 401(a) of the Code.
(d) Each Company Employee Plan has been maintained in compliance with
its terms and with the requirements prescribed by any and all statutes
(including but not limited to ERISA and the Code),orders, rules and regulations
which are applicable to such Company Employee Plans except where failure to be
in compliance individually or in the aggregate has not had and would not
reasonably be expected to have a Material Adverse Effect.
10
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its Subsidiaries
relating to, or change in employee participation or coverage under, any Company
Employee Plan or Company Benefit Arrangement which would increase materially the
expense of maintaining such Company Employee Plan or Company Benefit Arrangement
above the level of the expense incurred in respect thereof for the fiscal year
ended December 31, 1998.
(f) The Company has complied with the requirements of Sections 4980B
and 4980D of the Code and Parts 6 and 7 of Title I of ERISA prior to and
including the Closing Date, except where failure to be in compliance
individually and in the aggregate has not had and would not reasonably be
expected to have a Material Adverse Effect and, to the Company's knowledge, no
tax payable on account of Section 4980B or Section 4980D of the Code has been
incurred by the Company or any of its Subsidiaries and remains unpaid.
(g) Except as may be contained in any of the agreements listed as
exhibits to the 1998 10-K, there is no term of any Company Employee Plan or
Company Benefit Arrangement covering a "disqualified individual" (as defined in
Section 280G(c) of the Code), or of any contract, instrument, agreement or
arrangement with any such disqualified individual, that individually or
collectively could result in a disallowance of the deduction for any "excess
parachute payment" (as defined in Section 280G(b)(i) of the Code) or the
imposition of the excise tax provided in Section 4999 of the Code. The
consummation of the transactions contemplated by this Agreement will not result
in any "excess parachute payment" or the imposition of any such excise tax.
(h) The Company has heretofore delivered or made available to Parent
copies of all of the Company Employee Plans, and to the extent required by law,
Summary Plan Descriptions and annual reports (Form 5500 Series) for the most
recent three years. The Company has also delivered all determination letters on
Company Pension Plans issued by the Internal Revenue Service, and the most
recent three auditor's report for such plans.
(i) There is no pending or, to the Company's knowledge, threatened
legal action, proceeding or investigation, other than routine claims for
benefits, concerning any Company Employee Plan, to the knowledge of the Company,
any fiduciary or service provider thereof and, to the knowledge of the Company,
there is no basis for any such legal action or proceeding.
(j) No Company Employee Plan or Company Benefit Arrangement provides
health, life or other similar welfare coverages after termination of employment
except to the extent required by applicable state insurance laws and Title I,
Part 6 of ERISA.
(k) With respect to each Company Employee Plan, Company Pension Plan or
Company Benefit Arrangement for which a separate fund of assets is or is
required to be maintained, full payment has been made of all amounts required of
the Company and its Subsidiaries and ERISA Affiliates under the terms of each
such Company Employee Plan, applicable law, through the Closing Date.
(l) Except as described in the 1998 10-K or the Company's Proxy
Statement for its 1999 Annual Meeting of Stockholders or Section 2.13 of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries has
any plan or policy obligating the Company or any Subsidiary to pay any amounts
of severance to any employee.
(m) The consummation of the transactions contemplated by this Agreement
will not result in an obligation of the Company to pay severance payments to any
employee other than as set forth in Section 2.13 of the Company Disclosure
Letter.
11
(n) The Company and its Subsidiaries and ERISA Affiliates do not
maintain, contribute to or have any liability with respect to a self-insured
group health plan or a multiple employer welfare plan as defined in section
3(40) of ERISA.
(o) Any bond required by ERISA has been maintained at all times so
required and is in full force and effect.
(p) All filings with respect to Company Employee Plans have been timely
made, except where failure to do so would not result in a Material Adverse
Effect.
2.14 Tax Returns and Reports.
(a) The Company and its Subsidiaries have paid all Taxes owed, and have
timely filed with the appropriate taxing authorities all federal, state, county,
local and foreign returns, estimates, information statements, reports and other
documents in respect of Taxes (as defined in Article VII) required to be filed
by the Company and its Subsidiaries, except where the failure to file such Tax
return would not individually or in the aggregate have a Material Adverse
Effect. No written claim has been made by any taxing authority in any
jurisdiction where the Company does not file Tax returns that the Company or any
Subsidiary is or may be subject to taxation by that jurisdiction.
(b) To the Company's knowledge, as of the date of this Agreement, none
of the federal, state, local or foreign Tax returns of the Company or its
Subsidiaries is presently being examined, audited or contested by the relevant
taxing authorities. The Company has not received any notice at any time prior to
the date of this Agreement from any taxing authority indicating that any of the
federal, state, local or foreign Tax returns of the Company or its Subsidiaries
will be audited, except for any audits that have been completed and for which
the Company has paid any outstanding Taxes. Neither the Company nor any of its
Subsidiaries has executed, or been asked in writing to execute, an agreement or
waiver extending the statutory period of limitation applicable to any Tax return
for any period with respect to which the applicable statute of limitations has
not expired.
(c) As of the date of this Agreement, the Company has no ruling
requests currently pending with the Internal Revenue Service.
(d) Neither the Company nor any of its past or present Subsidiaries has
ever been a member of an "affiliated group", as defined in Section 1504 of the
Code (or any analogous combined, consolidated or unitary group defined
understate, foreign or local Tax law), other than any affiliated group of which
the Company is the parent corporation.
(e) The Company and its Subsidiaries have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, consultant, independent contractor, creditor, stockholder or
other party except, where such failure to withhold or pay has not had, and would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Neither the Company nor any Subsidiary has made any payments,
and is not obligated to make any payments, that will not be deductible under
Section 280G of the code, or that may be subject to excise Tax under Section
4999 of the Code.
2.15 Trademarks, Patents and Copyrights.
(a) Except as set forth in Section 2.15 of the Disclosure Letter, the
Company and its Subsidiaries own or possess adequate licenses or other valid
rights to use all patents, patent rights, trademarks, trademark rights, service
marks, trade names, trade name rights, copyrights, know-how and
12
other proprietary information necessary for the conduct of the business of the
Company or any of its Subsidiaries as currently being, or proposed to be,
conducted and is unaware of any material assertions or claims challenging the
validity of any of the foregoing; and to the knowledge of the Company, the
conduct of the business of the Company and its Subsidiaries as now conducted or
proposed to be conducted does not and will not conflict with any patents, patent
rights, licenses, service marks, trademarks, trademark rights, trade names,
trade name rights or copyrights of others in any material way, except where such
failure has not had and would not reasonably be expected to have a Material
Adverse Effect. No infringement of any proprietary right owned by or licensed by
or to the Company or any of its Subsidiaries is known to the Company.
(b) The Company owns or has the right to use pursuant to valid license
agreements and software maintenance agreements all computer software necessary
for the conduct of the business (the "Software Licenses"). The Company is in
compliance with all of its Software Licenses, except for any non-compliance that
individually or in the aggregate has not had and would not reasonably be
expected to have a Material Adverse Effect. The consummation of the transactions
contemplated by this Agreement will not cause any of the Software Licenses to
terminate or become cancelable or trigger a third party consent requirement or
fee or penalty.
2.16 Disclosure Documents.
(a) Each document required to be filed by the Company with the SEC in
connection with the transactions contemplated by this Agreement, including on
Schedule 13E-3, (the "Company Disclosure Documents") and any amendments or
supplements thereto, will, when filed, comply as to form with the applicable
requirements of the Exchange Act and the rules and regulations thereunder.
(b) At the time any Company Disclosure Document or any amendment or
supplement thereto is first mailed to stockholders of the Company, it will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
filing of any Company Disclosure Documents or any amendment or supplement
thereto, and from the time of any distribution thereof through the Effective
Time each such Company Disclosure Document will not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading. The representations and warranties contained in paragraphs
(i) and (ii) of this Section 2.16 will not apply to statements or omissions
included in the Company Disclosure Documents, if any, based upon information
furnished to the Company in writing by Parent or Purchaser specifically for use
therein.
(c) The information with respect to the Company or any Subsidiary that
the Company furnishes to Parent or Purchaser in writing specifically for use in
the Schedule 13E-3 (as defined herein), the Preliminary Proxy Statement and the
Company Proxy Statement will not, at the time of the filing thereof, and from
the time of any distribution thereof through the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
The representations and warranties contained in this paragraph (iii) will not
apply to statements or omissions included in the Schedule 13E-3, the Preliminary
Proxy Statement and Company Proxy Statement, if any, based upon information
furnished by Parent or Purchaser, or their Affiliates specifically for use
therein.
2.17 Material Agreements. Except as set forth in the 1998 10-K, the
March 1999 10-Q, the June 1999 10-Q and the October 10-Q, and except for this
Agreement and the agreements specifically referred to herein, neither the
Company nor any of its Subsidiaries is a party to or bound by any of the
following
13
agreements (with the following agreements, and the agreements included
as exhibits to the SEC Reports, collectively referred to as the "Material
Agreements"):
(a) any contract or agreement or amendment thereto that would be
required to be filed as an exhibit to a registration statement on Form S-1 filed
by the Company as of the date hereof;
(b) any confidentiality agreement, non-competition agreement or other
contract or agreement that contains covenants limiting the Company's or any of
its Subsidiaries' freedom to compete in any line of business or in any location
or with any Person; and
(c) any loan agreement, indenture, note, bond, guarantee, debenture or
any other document or agreement evidencing a capitalized lease obligation or
other Indebtedness (as defined in Article VII) to any Person, other than any
Indebtedness in a principal amount less than $25,000 individually or $100,000 in
the aggregate. The Company has made available to the Parent true, correct and
complete copies of all Material Agreements together with all modifications and
supplements thereto.
2.18 Environmental Matters.
(a) Neither the Company nor any of its Subsidiaries nor to the
knowledge of the Company as of the date of this Agreement any operator or owner
of their respective past or present properties is in violation, or alleged
violation, of any judgment, decree, order, law, license, rule or regulation
pertaining to environmental matters, including without limitation, those arising
under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Super fund Amendments and Reauthorization Act of 1986 ("SARA"),
the Federal Water Pollution Control Act, the Solid Waste Disposal Act, as
amended, the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, the Occupational Safety and Health Act of 1970, as
amended, or any state or local statute, regulation, ordinance, order or decree
relating to health, safety or the environment (hereinafter "Environmental
Laws").
(b) There have been no material releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping) or threatened releases of any
hazardous waste as defined by 42 U.S.C. (S)6903(5), any hazardous substances as
defined by 42 U.S.C.(S)9601(33) or any toxic substance, oil or hazardous
materials or other chemicals or substances regulated by any Environmental Laws
("Hazardous Substances") on, upon, into or from any properties of the Company or
its Subsidiaries.
(c) As of the date of this Agreement, no material amounts of Hazardous
Substance has been discharged, generated, treated, manufactured, handled,
stored, transported, emitted, released or is present at any property now or
previously owned, leased or operated by the Company except in compliance with
all applicable Environmental Laws.
2.19 Insurance. The Company has previously provided to the Parent true
and correct copies of all insurance policies, in effect as of the date of this
Agreement, for the Company or any of its Subsidiaries. The Company has
previously furnished or made available to the Parent all material
correspondence, including any notices of cancellation, relating to these
insurance policies which was received by the Company prior to the date of this
Agreement. As of the date of this Agreement, all such insurance is in full force
and effect and no notice of cancellation or termination, or reduction of
coverage or intention to cancel, terminate or reduce coverage, has been received
by the Company with respect to any policy for such insurance.
14
2.20 Absence of Certain Business Practices. No employee, consultant,
agent or other representative of the Company or any of its Subsidiaries has
directly or indirectly within the past five years given or agreed to give any
gift or similar benefit to any customer, supplier, governmental employee or
other Person who is or may be in a position to help or hinder the business of
the Company or any of its Subsidiaries in connection with any actual or proposed
transaction which (a) would reasonably be expected to subject the Company or any
of its Subsidiaries to any material damage or penalty in any civil, criminal or
governmental litigation or proceeding, (b) if not given in the past, would
reasonably be expected to have had a Material Adverse Effect, or (c) if not
continued in the future, would reasonably be expected to have a Material Adverse
Effect. Without limiting the generality of the foregoing, the Company has not
committed, been charged with or to the knowledge of the Company been under
investigation with respect to, nor does there exist, any violation by the
Company of the Foreign Corrupt Practices Act, as amended.
2.21 Takeover Laws. The provisions of Sections 203 of the DGCL either
does not apply to the execution, delivery and performance of this Agreement, the
Stockholder Agreement or the Company Option Agreement and the consummation of
the Merger or has been rendered inapplicable because of a vote of the Board of
Directors of the Company approving the consummation of the Merger and the
transactions contemplated by this Agreement, the Stockholder Agreement and the
Option Agreement. No "fair price," "control share acquisition" or other similar
anti-take over statute or regulation enacted in any jurisdiction other than
Delaware is applicable to the execution, delivery and performance of this
Agreement, the Stockholder Agreement or the Company Option Agreement or the
consummation of the Merger.
2.22 [RESERVED]
2.23 [RESERVED]
2.24 Board Recommendation. The Board of Directors of the Company, at a
meeting duly called and held, has without any director present voting there
against (i) approved the Agreement and Plan of Merger, (ii) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are in
the best interests of the stockholders of the Company, and (iii) resolved
subject to its fiduciary duties under applicable law to recommend that the
stockholders of the Company adopt this Agreement.
2.25 Disclosure. To the Company's knowledge, as of the date of this
Agreement, taken as a whole the representations and warranties made by the
Company in this Agreement do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make such
representations and warranties made herein, in light of the circumstances under
which they are made, not misleading.
2.26 Brokers and Finders. The Company has furnished to Parent or its
counsel a true and complete copy of letter agreements (the "Engagement Letters")
between the Company and its counsel and its financial advisor, such Engagement
Letters being the only agreements pursuant to which such firms would be entitled
to any payment relating to the transactions contemplated hereunder. Other than
as set forth herein or in Section 2.26 of the Company Disclosure Letter, no
broker, financial advisor or investment banker or other person is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any of its Subsidiaries.
15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company that:
3.1 Organization and Qualification. Each of Parent and Purchaser is a
corporation or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has all
requisite power and authority to own, operate and lease its properties and to
carry on its business as it is now being conducted. Purchaser is a new
corporation that was formed for the purpose of consummating the transactions
contemplated by this Agreement. As of the date of this Agreement the Purchaser
is a wholly-owned Subsidiary of the Parent. Purchaser has not conducted any
business or engaged in any activities unrelated to the transactions contemplated
by this Agreement. Purchaser has no material liabilities other than in
connection with the transactions contemplated by this Agreement and the
Financing Agreements (as defined in Section 4.16).
3.2 Corporate Power, Authorization and Enforceability. Each of Parent
and Purchaser has full power and authority to enter into this Agreement and to
perform its obligations hereunder and to consummate all the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
Purchaser, the performance by each of Parent and Purchaser of their respective
obligations hereunder and the consummation by Parent and Purchaser of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors, or similar controlling body, of Purchaser and the Parent,
and the Parent as the sole stockholder of the Purchaser, and no other corporate
action on the part of Parent or Purchaser is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of Parent and Purchaser and is a
legal, valid and binding obligation of each of Parent and Purchaser, enforceable
against Parent and Purchaser in accordance with its terms.
3.3 No Conflict; Required Filings and Consents.
(a) Assuming satisfaction of all applicable requirements referred to in
Section 3.3(b) below, the execution and delivery of this Agreement by the Parent
and the Purchaser, the compliance by the Parent and the Purchaser with the
provisions hereof and the consummation by the Parent and the Purchaser of the
transactions contemplated hereby will not conflict with or violate any statute,
law, ordinance, rule, regulation, order, writ, judgment, award, injunction,
decree or ruling applicable to the Parent or any of its Subsidiaries or any of
their properties, or conflict with, violate or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, cancellation or acceleration of, or the loss of a benefit under, or
result in the creation of a lien, security interest, charge or encumbrance on
any of the properties or assets of the Parent or any of its Subsidiaries
pursuant to (i) the organizational documents of the Parent or any of its
Subsidiaries or (ii) any contract, lease, agreement, note, bond, mortgage,
indenture, deed of trust, or other instrument or obligation, or any license,
authorization, permit, certificate or other franchise, other than such
conflicts, violations, breaches, defaults, losses, rights of termination,
amendment, cancellation or acceleration, liens, security interests, charges or
encumbrances as to which requisite waivers have been obtained or which
individually and in the aggregate would not have a material adverse effect on
the ability of the Parent and Purchaser to perform their obligations under this
Agreement.
(b) Other than in connection with or in compliance with the provisions
of the DGCL, the Exchange Act, the "blue sky" laws of various states and the HSR
Act, if applicable (i) neither Parent nor Purchaser is required to submit any
notice, report, registration, declaration or other filing with any Governmental
Entity in connection with the execution or delivery of this Agreement by Parent
and Purchaser or the performance by Parent and Purchaser of their obligations
hereunder or the consummation by Parent and Purchaser of the transactions
contemplated by this Agreement and (ii) no waiver, consent,
16
approval, order or authorization of any Governmental Entity is required to be
obtained by the Parent or the Purchaser in connection with the execution or
delivery of this Agreement by Parent and Purchaser or the performance by the
Parent and the Purchaser of their obligations hereunder or the consummation by
the Parent and the Purchaser of the transactions contemplated by this Agreement.
3.4 Board Approval. The Board of Directors of the Purchaser and Parent
each have approved this Agreement, the Merger and the financing transactions
described in Section 3.7 hereof and has authorized the proper officers to
execute and deliver this Agreement and all necessary action has been taken in
connection therewith.
3.5 Brokers and Finders. No broker, finder or investment banker, other
than any whose fees and expenses will be paid by the Parent, is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Parent or any of its Subsidiaries.
3.6 Disclosure Documents.
(a) Each document required to be filed by the Parent or Purchaser with
the SEC in connection with the transactions contemplated by this Agreement,
including on Schedule 13E-3 (the "Purchaser Disclosure Documents") and any
amendments or supplements thereto, will, when filed, comply as to form with the
applicable requirements of the Exchange Act and the rules and regulations
thereunder.
(b) The information with respect to the Parent and Purchaser that
Parent furnishes to the Company in writing specifically for use in any Company
Disclosure Documents will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they made, not misleading; provided that no representation is made
by Parent or Purchaser with respect to statements or omissions in the Company
Disclosure Documents based upon information furnished to Parent or Purchaser by
the Company specifically for use therein.
(c) The Schedule 13E-3, the Preliminary Proxy Statement and Company
Proxy Statement will comply with the applicable requirements of the Exchange Act
and will not, at the time of the filing thereof, or from the time of any
distribution thereof through the Effective Time contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading; provided, that no
representation is made by the Purchaser with respect to the statements or
omissions in the Schedule 13E-3, the Preliminary Proxy Statement or the Company
Proxy Statement based upon information furnished to Parent or Purchaser in
writing by the Company specifically for use therein.
(d) The information contained in the Schedule 13D and the amendments
thereto filed by the Parent and certain of its affiliates is true and accurate
in all material respects. In addition, neither Parent, Purchaser nor any of
their affiliates were, immediately prior to the execution of the Letter of
Intent, "interested shareholders" within the meaning of Section 203 of the DGCL,
or subject to the prohibitions on transactions generally applicable to such
"interested shareholders."
3.7 Disclosure. To the knowledge of Purchaser and Parent, as of the
date of this Agreement, taken as a whole the representations and warranties made
by them in this Agreement do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make such
representations and warranties made herein, in light of the circumstances under
which they are made, not misleading.
17
ARTICLE IV
COVENANTS
4.1 Conduct of Business by the Company. Except as required or permitted
by this Agreement or as disclosed in Section 4.1 of the Company Disclosure
Letter, during the period from the date of this Agreement until the Effective
Time, the Company agrees as to itself and its Subsidiaries that (except to the
extent that Parent or Purchaser shall otherwise consent in writing) the Company
and its Subsidiaries shall conduct their respective operations in the ordinary
course of business consistent with past practice, and each of the Company and
its Subsidiaries will use its reasonable efforts to preserve intact its present
business organization, to keep available the services of its present officers
and employees and to maintain satisfactory relationships with licensors,
licensees, suppliers, contractors, distributors, customers and others having
business relationships with it and to maintain insurance on the same terms as
are in effect on the date of this Agreement. Without limiting the generality of
the foregoing, during the period from the date of this Agreement to the
Effective Time, neither the Company nor any of its Subsidiaries shall, without
the prior written consent of Purchaser:
(i) amend its Certificate of Incorporation or other
charter document or Bylaws;
(ii) authorize for issuance, issue, sell, deliver, pledge
or agree or commit to issue, sell, deliver or pledge
(whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to
purchase or otherwise) any capital stock of any class
or any debt or other securities convertible into
capital stock or equivalents (including, without
limitation, stock appreciation rights), or amend any
of the terms of any of the foregoing, other than the
issuance of shares of capital stock upon the exercise
of outstanding options under the Company Stock Option
Plan;
(iii) (A)split, combine or reclassify any shares of its
capital stock, or authorize or propose the issuance
or authorization of any other securities in respect
of, in lieu of or in substitution for shares of its
capital stock, or declare, set aside or pay any
dividend or other distribution (whether in cash,
stock or property or any combination thereof) in
respect of its capital stock, adopt or approve any
Rights Plan, or repurchase, redeem or otherwise
acquire any of its securities or any securities of
its Subsidiaries, or (B) declare or pay any dividend
of any kind, make any payment of cash or other
property to shareholders or to terminate, cancel or
otherwise settle any outstanding Options under the
Company Stock Option Plan, other than in the case of
clauses (A) or (B) above for the issuance of Shares
in connection with the exercise of options or the
repurchase of Shares to the extent contractually
required pursuant to the terms of existing employee
stock repurchase agreements or this Agreement, or the
cancellation of non-vested options of terminated
employees; or issue any new Options or equivalent
instruments of any kind;
(iv) (A) incur or assume any short-term or long-term
indebtedness for borrowed money, including borrowings
against the existing
18
credit facility with BankBoston N.A. in the ordinary
course of business, or grant, extend or increase the
amount of a mortgage lien on any leasehold or fee
simple interest of the Company or its Subsidiaries;
or, except in the ordinary course of business
consistent with past practice in the case of clauses
(B) through (E) below, (B) assume, guarantee, endorse
or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the
obligations of any other Person, except for
obligations of the Company or any Subsidiary of the
Company; (C) make any loans, advances or capital
contributions to, or investments in, any other
Person; (D) pledge or otherwise encumber shares of
capital stock of the Company or any of its
Subsidiaries; or (E) mortgage or pledge any of its
assets, tangible or intangible, or create or suffer
to exist any lien thereon except as existing on the
date of this Agreement or as may be required under
agreements outstanding on the date of this Agreement
to which the Company or any of its Subsidiaries are
parties;
(v) except as to salary increases and bonus made in the
ordinary course, expressly provided in this
Agreement, enter into, adopt or amend in any manner
or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock
appreciation right, restricted stock, performance
unit, stock equivalent, stock purchase agreement,
pension, retirement, deferred compensation,
employment, severance, change-in-control or other
employee benefit agreement, trust, plan, fund or
other arrangement for the benefit or welfare of any
director, officer or employee, or increase in any
manner the compensation (including bonuses) or fringe
benefits of any director, officer or employee or pay
any benefit not required by any plan or arrangement
as in effect as of the date of this Agreement or
enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(vi) sell, lease, license, pledge or otherwise dispose of
or encumber any material assets except in the
ordinary course of business consistent with past
practice (including without limitation any
indebtedness owed to it or any claims held by it);
(vii) except as otherwise permitted pursuant to Section
4.5, acquire or agree to acquire any business or any
corporation, partnership, limited liability company,
association or other business organization or
division thereof, whether by merger or consolidation
or by purchasing capital stock or assets, or by any
other manner;
(viii) change any of the accounting principles or practices
used by it affecting its assets, liabilities or
business, except for such changes required by a
change in generally accepted accounting principles;
(ix) pay, discharge or satisfy any claims, liabilities or
obligations (whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise),
other than the payment, discharge or satisfaction of
liabilities (A) in the ordinary course of business
consistent with past practices, (B) with notice to
Purchaser, in an
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amount which does not exceed $100,000 in the
aggregate, (C) incurred pursuant to the terms of the
Engagement Letters (including any payments made prior
to the date of this Agreement) plus reimbursement of
out-of-pocket expenses, or (D) incurred in connection
with the transactions contemplated hereby, including
any costs for legal and accounting professionals, but
only if they are calculated on a time and
disbursements basis at standard rates and itemized in
reasonable detail;
(x) without prior consultation with the Parent (in
addition to the consent requirement described above)
commence any litigation or arbitration other than in
accordance with past practice or settle any
litigation or arbitration for money damages or other
relief in excess of $50,000 or if as part of such
settlement the Company or any Subsidiary would agree
to any restrictions on its operations;
(xi) grant any license with respect to or otherwise convey
any intellectual property rights, other than in the
ordinary course of business consistent with past
practice;
(xii) elect or appoint any new directors or executive
officers of the Company or any Subsidiary;
(xiii) waive, release or amend its rights under any
confidentiality, "standstill" or similar agreement
that the Company entered into in connection with its
consideration of a potential strategic transaction;
provided, however, that the Company may waive,
release or amend its rights under any such
confidentiality, "standstill" or similar agreement if
the Company's Board determines, based on the advice
of independent legal counsel, that failure to do so
would be reasonably likely to constitute a breach of
its fiduciary duties to the Company's stockholders
under applicable law; or
(xiv) take, or agree in writing or otherwise to take, any
of the actions described in Sections 4.1(i) through
4.1(xiii).
4.2 Access to Information; Confidentiality.
(a) From the date of this Agreement to the Effective Time, the Company
shall, and shall cause its Subsidiaries, officers, directors, employees and
agents to, afford the officers, employees and agents of Parent, Purchaser and
their Affiliates and the attorneys, accountants, banks, other financial
institutions and investment banks working with Parent or Purchaser, and their
respective officers, employees and agents, reasonable access, at all reasonable
times upon reasonable notice and in such manner as will not unreasonably
interfere with the conduct of the Company's business, to its officers,
employees, agents, properties, books, records and contracts, and shall furnish
Parent, Purchaser and their Affiliates and the attorneys, banks, other financial
institutions and investment banks working with Parent or Purchaser, all
financial, operating and other data and information as they reasonably request.
(b) Any information heretofore or hereafter furnished by the Company
which is non-public, confidential or proprietary in nature is referred to in
this Agreement as "Confidential Information". The Parent and the Purchaser agree
that the Confidential Information will be used solely for the purpose of
consummating the transactions contemplated by this Agreement, and until the
Effective Time, such information will be kept confidential by the Parent and the
Purchaser and their Representatives (as
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defined below), except that the Confidential Information or portions thereof may
be disclosed to those Representatives of the Parent and the Purchaser who need
to know such information solely for the purpose of evaluating the transactions
contemplated by this Agreement.
(c) In the event that the Parent or the Purchaser or any of their
Representatives become legally compelled (by deposition, interrogatory, request
for documents, subpoena, civil investigative demand or similar process) to
disclose any of the Confidential Information, the Parent or the Purchaser shall
provide the Company with prompt prior written notice of such requirement so that
the Company may seek a protective order or other appropriate remedy and/or waive
compliance with the terms of this Section 4.2. In the event that such protective
order or other remedy is not obtained, or that the Company waives compliance
with the provisions hereof, the Parent or the Purchaser agree to furnish only
that portion of the Confidential Information which the Parent or the Purchaser
are advised by counsel is legally required and to exercise commercially
reasonable efforts to obtain assurance that confidential treatment will be
accorded such Confidential Information.
(d) The term "Confidential Information" does not include any
information that the Parent or the Purchaser can demonstrate that (i) at the
time of disclosure or thereafter is generally available to the public (other
than as a result of its disclosure directly or indirectly by the Parent or the
Purchaser or their Representatives), or (ii) was available to the Parent or the
Purchaser on a non-confidential basis from a source other than the Company or
its advisors, provided that such source confirms to the Parent or the Purchaser
in writing that such source is not and was not bound by a confidentiality
agreement regarding the Company.
(e) If this Agreement is terminated pursuant to Article VI, the Parent
and the Purchaser will promptly return to the Company any and all copies of the
Confidential Information in their possession or in the possession of their
Representatives, and the Parent or the Purchaser and their Representatives will
promptly destroy all copies of any analyses, compilations, studies or other
documents prepared by or for the Parent or the Purchaser which reflect or
contain any Confidential Information, except for any of the foregoing which
Parent or its counsel deems advisable to retain in connection with pending or
future litigation, provided that such Confidential Information is retained by
the Parent's counsel and only for so long as considered advisable in light of
any pending or future litigation.
(f) No investigation pursuant to this Section 4.2 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
4.3 Preparation of Proxy Statement; Stockholders Meeting; Schedule
13E-3.
(a) The Company will, as promptly as practicable following the date of
this Agreement and in consultation with Parent and Purchaser, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Stockholders'
Meeting") for the purpose of approving this Agreement, the Merger and the
transaction contemplated by this Agreement. Nothing herein shall prevent the
company from adjourning or postponing the Company's stockholders meeting if
there are insufficient shares of Company Common Stock necessary to conduct
business at its meeting of the Stockholders. Subject to Section 4.5, the Company
will, through the Board of Directors, recommend to its stockholders approval of
the foregoing matters and seek to obtain all necessary votes and approvals
thereof by the stockholders required to approve the Merger.
(b) In connection with the Stockholders' Meeting contemplated hereby,
the Company will promptly prepare and file, and Parent and Purchaser will
cooperate with the Company in the preparation and filing of, a preliminary proxy
statement (the "Preliminary Proxy Statement") with the
21
SEC and will use its commercially reasonable efforts to respond to the comments
of the SEC concerning the Preliminary Proxy Statement and to cause a final proxy
statement (the "Company Proxy Statement") to be mailed to the Company's
stockholders, in each case as soon as reasonably practicable. The Purchaser will
promptly prepare, and the Company will cooperate with the Purchaser in the
preparation and filing of the Rule 13E-3 Transaction Statement on Schedule 13E-3
(the "Schedule 13E-3") with the SEC and will use its commercially reasonable
efforts to respond to comments by the SEC concerning the Schedule 13E-3.
Purchaser shall be given a reasonable opportunity to review and comment on all
filings with the SEC and all mailings to the Company's stockholders in
connection with the Merger prior to the filing or mailing thereof, and the
Company shall use its commercially reasonable efforts to reflect all such
comments. The Company shall pay the filing fees for any Company Schedule 13E-3
and the Preliminary Proxy Statement. Each party to this Agreement will notify
the other parties promptly of the receipt of the comments of the SEC, if any,
notification of SEC approval of the Company Proxy Statement and of any request
by the SEC for amendments or supplements to the Schedule 13E-3, the Preliminary
Proxy Statement or the Company Proxy Statement or for additional information,
and will promptly supply the other parties with copies of all correspondence
between such party or its representatives, on the one hand, and the SEC or
members of its staff, on the other hand, with respect to the Schedule 13E-3, the
Preliminary Proxy Statement, the Company Proxy Statement or the Merger.
(c) If at any time prior to the Stockholders' Meeting, any event should
occur relating to the Company or any of the Subsidiaries which should be set
forth in an amendment of, or a supplement to, the Schedule 13E-3 or the Company
Proxy Statement, the Company will promptly inform Parent and Purchaser. If at
any time prior to the Stockholders' Meeting, any event should occur relating to
Parent and Purchaser or any of its respective Associates or Affiliates, or
relating to the plans of any such persons for the Surviving Corporation after
the Effective Time of the Merger, or relating to the Financing, that should be
set forth in an amendment of, or a supplement to, the Schedule 13E-3 or the
Company Proxy Statement, the Purchaser, with the cooperation of Company, will,
upon learning of such event, promptly prepare, file and, if required, mail such
amendment or supplement to the Company's stockholders; provided that, prior to
such filing or mailing, the Company shall consult with Purchaser with respect to
such amendment or supplement and shall afford Purchaser reasonable opportunity
to comment thereon.
(d) Purchaser shall furnish to the Company the information relating to
parent and Purchaser and their Affiliates and the plans of such persons for the
Surviving Corporation after the Effective Time on the Merger, and relating to
the Financing, which is required to be set forth in the Preliminary Proxy
Statement or the Company Proxy Statement under the Exchange Act and the rules
and regulations of the SEC thereunder. The Company shall cause, to the extent
available, to be included (i) as an exhibit to the Preliminary Proxy Statement
and the Company Proxy Statement, the written fairness opinion of the Financial
Advisor referred to in Section 2.23 as an exhibit to the Schedule 13E-3 any
reports or opinion delivered to the Company's Board of Directors by the
Financial Advisor in connection with the delivery of the Fairness Opinion which
are required under Schedule 13E-3 to be filed as exhibits.
(e) The Company will cause its transfer agent to make stock transfer
records relating to the Company available to the extent reasonably necessary to
effectuate the intent of this Agreement.
4.4. Regulatory Filings. Promptly after the delivery of the
Commitments, the parties will cooperate in making any filings necessary under
any government regulatory requirements that may be applicable to the Merger,
including filings, if any, necessary under the HSR Act.
4.5. No Solicitation by the Company.
(a) Except as provided in Section 4.5(b), the Company agrees that, from
the
22
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement pursuant to Section 6.1, the Company shall not,
nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit
any of its directors, officers or employees or any representative retained by it
(including all Company advisors) or any of its Subsidiaries to, directly or
indirectly through another Person, (i) solicit, initiate, request or take any
other action to facilitate (including by way of furnishing non-public
information) any inquiries or the making of any proposal or offer from any third
party other than the Parent or its Affiliates regarding any merger,
consolidation, share exchange, recapitalization, sale of substantial assets,
sale or purchase of (or right to sell or purchase) shares of capital stock
(other than pursuant to the exercise of stock options outstanding on the date of
this Agreement), tender offer or similar transactions involving the Company or
any of its Subsidiaries (an "Acquisition Proposal") or (ii) participate in any
discussions or negotiations regarding any Acquisition Proposal; provided,
however, that if, at any time, the Board of Directors of the Company or the
Special Committee of the Board of Directors determines in good faith, after
consultation with and receipt of advice from outside counsel or its financial
advisor, that it is necessary to do so in order to act in a manner consistent
with its fiduciary duties to the Company's stockholders under applicable law,
the Company may, in response to what the Board of Directors determines, in good
faith after consultation with and receipt of advice from outside counsel, may
lead to a Superior Proposal (as defined below) and subject to delivering a
Company Notice (as defined in paragraph (c) below) and compliance with the other
provisions of paragraph (c) below, following delivery of the Company Notice (x)
furnish information with respect to the Company and its Subsidiaries to any
Person making such Acquisition Proposal pursuant to a confidentiality agreement
entered into between such Person and the Company with terms no less favorable to
the Company than those contained in Section 4.2 of this Agreement and (y)
participate in discussions or negotiations regarding such Acquisition Proposal.
(b) Except as expressly permitted by this Section 4.5, neither the
Board of Directors of the Company nor the Special Committee shall (i) withdraw
or modify, or propose publicly to withdraw or modify, in a manner adverse to the
Parent, the approval or recommendation by such Board of Directors of the Merger
or this Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Acquisition Proposal, or (iii) cause the Company to enter into
any outline, letter of intent, agreement in principle, acquisition agreement or
other similar agreement, whether or not binding on the parties, (each, a
"Company Acquisition Agreement") related to any Acquisition Proposal.
Notwithstanding the foregoing, if at anytime the Board of Directors of the
Company or the Special Committee of the Board of Directors determines in good
faith, after consultation with and receipt of advice from outside counsel or its
financial advisor, that it is necessary to do so in order to act in a manner
consistent with its fiduciary duties to the Company's stockholders under
applicable law, subject to compliance with paragraph (c) below, the Board of
Directors of the Company (x) may withdraw or modify, or propose publicly to
withdraw or modify, any approval or recommendation by such Board of Directors of
the Merger or this Agreement and (y) may approve or recommend, or propose
publicly to approve or recommend, a Superior Proposal and (z) may cause the
Company to enter into a Company Acquisition Agreement related to a Superior
Proposal and may terminate this Agreement pursuant to Section 6.1(d) and accept
such Superior Proposal. For purposes of this Agreement, a "Superior Proposal"
means an Acquisition Proposal that (A) would take the form of either (i) a
merger, consolidation, share exchange, recapitalization, business combination,
or other similar transaction; (ii) a sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 100% of the assets of the Company and its
Subsidiaries, taken as a whole, in a single transaction or series of
transactions; or (iii) a tender offer or exchange offer for 100% of the
outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act of 1933, as amended, in
connection therewith; (B) the Board of Directors of the Company or the Special
Committee of the Board of Directors of the Company, in good faith, based on the
advice of its outside counsel and or its financial advisor, determines to be of
a higher price per share and more favorable than the transaction contemplated
hereunder; and (C) the Superior Proposal includes evidence of adequate financing
in the form of an executed commitment letter.
23
(c) In addition to the obligations of the Company as set forth in
paragraphs (a) and (b) of this Section 4.5, the Company immediately shall advise
the Purchaser orally and in writing of any request for non-public information,
any Acquisition Proposal, including all of the material proposed terms of such
Acquisition Proposal, the identity of the third party, or any decision by the
Company to take any of the actions permitted in clauses (x) or (y) of paragraph
(a) above (with any such notice referred to as a "Company Notice"). Any such
Company Notice will be delivered promptly after (and in no event later than 24
hours after) receipt of any request for non-public information or of any
Acquisition Proposal and prior to the Company taking any of the actions
permitted in clauses (x) or (y) of paragraph (a) above. In addition, in the
event the Company intends to enter into a Company Acquisition Agreement relating
to a Superior Proposal, the Company will deliver a Company Notice at least
twenty-four (24) hours (but Company Notices given on a non-business day, or
after 6:00 p.m. on a business day, shall take effect on the first business day
thereafter) prior to entering into such Company Acquisition Agreement, which
Company Notice will identify the third party and the material proposed terms of
such Superior Proposal. Subject to confidentiality agreement requirements
imposed by any such third party and which the Board of Directors determines in
good faith, after consultation with and receipt of advice from outside counsel,
are necessary to enter into in order to act in a manner consistent with its
fiduciary duties to the Company's stockholders under applicable law, the Company
will update the information required to be provided in the Company Notice upon
the request of the Purchaser.
4.6 Public Announcements. Parent and Purchaser on the one hand, and the
Company on the other hand, will consult with each other before, and obtain the
other party's consent with respect to, issuing any press release, any filing
with the SEC on Form 8-K or otherwise making any public statements with respect
to this Agreement or the Merger or the other transactions contemplated hereby,
and shall not issue any such press release, SEC Form 8-K filing or make any such
public statement prior to such consultation and consent, except to the extent
that compliance with legal requirements and NASDAQ rules require a party to
issue a press release or public announcement or make an 8-K filing. Any consent
required pursuant to the preceding sentence shall not be unreasonably withheld
or delayed.
4.7 Notification of Certain Matters.
(a) The Company shall give prompt notice (which notice shall state that
it is delivered pursuant to Section 4.7 of this Agreement) in writing to
Purchaser, and Parent and Purchaser shall give prompt notice in writing to the
Company, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
as of the time such representation or warranty is made and (ii) any material
failure of the Company, Parent or Purchaser, as the case may be, or of any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, no such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
(b) The Company shall give prompt notice (which notice shall state that
it is delivered pursuant to Section 4.7 of this Agreement) in writing to
Purchaser , and Parent and Purchaser shall give prompt notice in writing to the
Company, of any occurrence that has had or may reasonably be expected to have a
Material Adverse Effect, other than changes relating to or arising out of the
economy in general or the industries of the Company and its Subsidiaries in
general and not specifically relating to the Company or any of its Subsidiaries.
24
4.8 Officers' and Directors' Indemnification; Insurance.
(a) The Parent, Purchaser and Surviving Corporation agree that for a
period ending on the 6th anniversary of the Effective Time, the Surviving
Corporation will maintain all rights to indemnification (including with respect
to the advancement of expenses incurred in the defense of any action or suit)
existing on the date of this Agreement in favor of the present and former
directors, officers, employees and agents of the Company as provided in the
Company's Certificate of Incorporation and Bylaws, in each case as in effect on
the date of this Agreement, and that during such period, neither the Certificate
of Incorporation nor the Bylaws of the Surviving Corporation shall be amended to
reduce or limit the rights of indemnity afforded to the present and former
directors, officers, employees and agents of the Company, or the ability of the
Surviving Corporation to indemnify them, nor to hinder, delay or make more
difficult the exercise of such rights or indemnity or the ability to indemnify;
provided; however, that in the event any claim or claims are asserted or made
within such 6-year period, all rights to indemnification in respect to any such
claim or claims shall continue until the disposition of any and all such claims.
(b) The Parent, Purchaser and Surviving Corporation agree to cause the
Surviving Corporation to indemnify to the fullest extent permitted under its
Certificate of Incorporation, its Bylaws and applicable law the present and
former directors, officers, employees and agents of the Company against all
losses, damages, liabilities or claims made against them arising from their
service in such capacities prior to and including the Effective Time, to at
least the same extent as such persons are currently permitted to be indemnified
pursuant to the Company's Certificate of Incorporation and Bylaws, for a period
ending on the 6th anniversary of the Effective Time.
(c) Should any claim or claims be made against any present or former
director, officer, employee or agent of the Company, on or prior to the 6th
anniversary of the Effective Time, arising from such person's service as such at
any time prior to the Effective Time, the provisions of this Section 4.8
respecting the Certificate of Incorporation and Bylaws and the obligation of
indemnity of the Surviving Corporation shall continue in effect until the final
disposition of all such claims.
(d) The Purchaser agrees that in the event that the Surviving
Corporation or any of its successors or assigns consolidates with or merges into
any other Person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger, then and in each such case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations of the surviving Corporation, set forth
in this Section 4.8. The provisions of the Section 4.8(d) are in addition to,
and not substitution for, any other rights or indemnification that any such
person may have by contract or otherwise.
(e) The provisions of this Section 4.8 are intended to be for the
benefit of, and shall be enforceable by, each indemnified party and such party's
heirs and representatives.
(f) The Parent will cause the Purchaser to maintain for a period of 6
years from the Effective Time the Company's current directors' and officers'
insurance and indemnification policy to the extent that it provides coverage for
events occurring prior to the Effective Time (the "D&O Insurance") for all
persons who are directors and officers of the Company on the date of this
Agreement, so long as such insurance is available on commercially reasonable
terms and the annual premium therefor would not be in excess of 150% of the last
annual premium paid prior to the date of this Agreement (the "Maximum Premium").
If the existing D&O Insurance expires, is terminated or cancelled during such
6-year period, the Purchaser will use all reasonable efforts to cause to be
obtained as much D&O Insurance as can be obtained for the remainder of such
period for an annualized premium not in excess of the Maximum Premium, on terms
and conditions no less advantageous than the existing D&O Insurance.
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4.9 Additional Agreements.
(a) Subject to the terms and conditions hereof, each of the parties to
this Agreement agrees to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement (including consummation of the
Merger) and to cooperate with each other in connection with the foregoing.
(b) Subject to the terms and conditions hereof, each of the parties to
this Agreement agrees to use commercially reasonable efforts to: (i) obtain all
necessary waivers, consents and approvals from other parties to loan agreements,
leases, licenses and other contracts, (ii) obtain all necessary consents,
approvals and authorizations as required to be obtained under any federal, state
or foreign law or regulations, including, but not limited to, those required
under the HSR Act and those referred to in Section 4.14, (iii) defend all
lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, (iv) lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby, (v) effect
all necessary registrations and filings, including, but not limited to, filings
under the HSR Act and submissions of information requested by Governmental
Entities, and (vi) fulfill all conditions to this Agreement.
(c) Neither Parent nor Purchaser shall enter into any transaction that
would delay or adversely effect the HSR filing if such filing is required under
the terms hereof.
4.10 Company Indebtedness. Prior to the Effective Time, the Company and
Purchaser shall cooperate with each other in taking such actions requested by
the Purchaser as are reasonably appropriate or necessary in connection with the
redemption, prepayment, modification, satisfaction or elimination at or promptly
after the Effective Time of any outstanding Indebtedness of the Company or any
of its Subsidiaries, including contacting lenders for pay-off letters and lien
discharges.
4.11 Other Actions by the Company. If any "fair price," "control share
acquisition," "shareholder protection" or other form of anti-takeover statute,
regulation or charter provision or contract is or shall become applicable to the
Merger or the transactions contemplated hereby, the Company and the Board of
Directors of the Company shall, promptly upon the request of the Purchaser,
grant such approvals and take such actions as are necessary under such laws and
provisions so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
the extent allowable to eliminate or minimize the effects of such statute,
regulation, provision or contract on the transactions contemplated hereby.
4.12 Litigation Cooperation. Promptly upon execution of this Agreement
and until the Effective Time, each of the Company, Parent and Purchaser shall
cooperate with each other in connection with any litigation by a third party
arising out of or in connection with this Agreement or any of the transactions
contemplated by this Agreement.
4.13 Future Filings. The Company will deliver to the Purchaser as soon
as they become available true and complete copies of any report or statement
mailed by it to its stockholders generally or filed by it with the SEC
subsequent to the date of this Agreement and prior to the Effective Time. As of
their respective dates, such reports and statements (excluding any information
therein provided by the Parent or the Purchaser, as to which the Company makes
no representation) will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are made,
not misleading and will comply as to form in all material respects with all
applicable requirements of law. The consolidated financial statements of the
Company to be included in such reports and statements (excluding any
26
information therein provided by the Parent or the Purchaser, as to which the
Company makes no representation) will be prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except (i) as otherwise indicated in such financial statements
and the notes thereto or (ii) in the case of unaudited interim statements, to
the extent permitted under Form 10-Q under the Exchange Act) and will present
fairly the consolidated financial position, results of operations and cash flows
of the Company as of the dates thereof and for the periods indicated therein
(subject, in the case of any unaudited interim financial statements, to normal
year-end audit adjustments). The Parent shall deliver to the Company as soon as
they become available, true and complete copies of any report or statement
mailed by it to the Company's stockholders generally or filed by it with the SEC
subsequent to the date of this Agreement and prior to the Effective Time.
4.14 Board Action Relating to Stock Option Plans. As soon as
practicable following the date of this Agreement, the Board of Directors of the
Company (or, if appropriate, any committee administering a Company Stock Option
Plan) shall adopt such resolutions or take such actions as may be required to
adjust the terms of all outstanding Company Stock Options in accordance with
Section 2.2 and shall make such other changes to the Company Stock Option Plan
in accordance with the terms of the Company Stock Option Plan as Purchaser and
the Company deem appropriate to give effect to the Merger, and to terminate such
plans as of the Effective Time.
4.15 Company Actions Relating to Tax Matters. Without the prior consent
of Purchaser, neither the Company nor any Subsidiary shall make or change any
election, request permission of any Tax authority to change any accounting
method, file any amended Tax return, enter into any closing agreement, settle
any Tax claim or assessment relating to the Company or its Subsidiaries,
surrender any right to claim a refund of Taxes, or consent to any extension or
waiver of the limitation period applicable to any Tax claim or assessment
relating to the Company or its Subsidiaries, if any such election, adoption,
change, amendment, agreement, settlement, surrender or consent would have the
effect of materially increasing the Tax liability of the Company, any
Subsidiary, or the Surviving Corporation (or Parent).
4.16 Financing. On or before January 27, 2000, Purchaser will deliver
to the Company, in forms reasonably satisfactory to the Company, (i) a
commitment letter regarding a senior credit facility (the "Senior Credit
Facility") and (ii) a commitment letter regarding necessary other financing,
including junior or subordinated debt financing (collectively, the
"Commitments"), and (iii) commitments from the continuing shareholders and other
persons, including affiliates of the Parent and Purchaser, to contribute amounts
as equity for the Purchaser and the Surviving Corporation sufficient to
consummate the transactions contemplated by the Merger Agreement, including the
Merger (the "Financing"). In the event that such Commitments are not delivered
within such period, the Company shall thereafter have the right, until such
Commitments are delivered, to terminate this Agreement under Section 6.1 hereof,
but the failure to obtain such Commitments shall not be a breach of this
Agreement for which the Company may seek damages against the Parent or Purchase.
Purchaser has had discussions with one or more banks, financial institutions or
other public or private financing sources (the "Lending Sources") to determine
the available terms of such financing and reasonably expects that such
Commitments will be obtainable from such Lending Source of such terms. The
Company acknowledges that the Lending Sources, Parent and Purchaser have not had
the opportunity to complete due diligence on all aspects of the Company's
operations, agreements and finances, including with respect to the Company's
operations for the period ended December 31, 1999, and that the results of such
investigation may result in the Financing being unavailable or available only in
amounts and on terms not acceptable to the Purchaser or Parent.
4.17 Voting. Each of the Parent, Purchaser and their Affiliates will
vote any shares of the Company's Common Stock held by them, or which they have
the right to vote, in favor of approval of the Merger, in person, or by proxy.
27
4.18 Knowledge of Inaccuracies. In the event that Parent or Purchaser
shall have knowledge on or prior to the date of this Agreement of the existence
or occurrence of any material fact or event which has caused, or is reasonably
likely to cause, any inaccuracy or breach by the Company of any representation,
warranty, covenant or other obligation hereunder, then Parent or Purchaser shall
use good faith efforts to promptly notify the Company of such matter and
further, in the event that it is determined that the Parent or Purchaser had
actual knowledge prior to the date of this Agreement of any item described
above, and such item or matter is claimed by the Purchaser to be cause for
termination of this Agreement, then Parent shall not be able to seek damages
from the Company for any breach of representation, warranty, covenant or
agreement arising out of such item or matter.
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ARTICLE V
CONDITIONS OF MERGER
5.1 Conditions to the Obligations of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) This Agreement and the Merger shall have been approved and adopted
by the affirmative vote of a majority of shares held by the stockholders of the
Company, as required under the laws of the State of Delaware.
(b) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or be
exterminated.
(c) No temporary restraining order, preliminary or permanent
injunction, judgment or other order, decree or ruling nor any statute, rule,
regulation , SEC stop order or other order shall be in effect which would make
the acquisition or holding by Parent or its Affiliates of Shares or shares of
Common Stock of the Surviving Corporation illegal or otherwise prevent the
consummation of the Merger.
5.2 Conditions Precedent to Parent's and Purchaser's Obligations. In
addition to the conditions set forth in Section 5.1, the Parent and Purchaser
shall be obligated to perform the acts contemplated for performance by them
under Article I only if each of the following conditions is satisfied at or
prior to the Closing Date, unless any such condition is waived in writing by
Parent and Purchaser:
(a) The receipt of cash proceeds of the Financing under the terms and
in the amounts set forth pursuant to the terms of the Commitments ("Financing
Condition").
(b) The representations and warranties of the Company set forth in
Article 2 shall be true and correct as of the Closing Date with the same force
and effect as though made again at and as of the Closing Date, except for any
representations and warranties that address matters only as of a particular date
specifically set forth in such representation, other than the date hereof,
(which shall remain true and correct as of such date).
(c) The Company shall have performed and complied (x) in all respects
with its covenants under Sections 4.1(ii) and 4.1(iii) and (y) in all material
respects, individually or in the aggregate, (without giving duplicative effect
to any materiality qualification contained in the applicable obligation) with
all other covenants and agreements contained in this Agreement required to be
performed or complied with by it on or before the Closing Date.
(d) Since the date of this Agreement, there shall not have been the
occurrence of any event or condition, or series of events or conditions, that
has had or would reasonably be expected to have a Material Adverse Effect.
(e) Force Majeure. There shall not have occurred (i) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange, which suspension or limitation shall continue for at least
three consecutive trading days, or (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the united States, or (iii) a
commencement of a war or armed hostility involving the United States which would
reasonably be expected to have a Material
29
Adverse Effect on the Company; or (iv) in the case of any of the foregoing
existing on the date of this Agreement, a material acceleration, escalation or
worsening thereof.
(f) The Company shall have executed and delivered to Purchaser and
Parent at and as of the Closing a certificate, duly executed by the Company's
Chief Financial Officer, in form and substance reasonably satisfactory to Parent
and Parent's counsel, certifying that to such officers' knowledge, the
conditions specified in (a), (b), (c), (d) and (e) have been satisfied.
(g) The Company shall have obtained the third party consents listed in
Section 5.2(h) of the Company Disclosure Letter or otherwise necessary to
Consummate the Merger.
(h) The Company shall have entered into an Employment Agreement with
Steven L. Bock in a form acceptable to each of Bock, the Purchaser and the
Parent (the "Employment Agreement").
(i) As of the Effective Time, the Options set forth in Section 1.7 of
the Company Disclosure Letter shall have been terminated to the Purchaser's
reasonable satisfaction.
(j) Delivery by the Company of audited financial statements for the
year ended December 31, 1999, together with an unqualified opinion with respect
thereto, from the Company's accountants.
(k) Shareholders holding Common Stock representing more than five
percent (5%) of the Company's outstanding stock shall not have dissented from
the Merger and exercised their rights under Section 262 of the DGCL.
5.3 Conditions to Obligations of the Company. In addition to the
conditions set forth in Section 5.3 and 6.1, the Company shall be obligated to
perform the acts contemplated for performance by it under Article I only if each
of the following conditions is satisfied at or prior to the Closing Date, unless
any such condition is waived in writing by the Company:
(a) The representations and warranties of the Parent and Purchaser set
forth in Article 3 shall be true and correct as of the Closing Date with the
same force and effect as though made again at and as of the Closing Date, except
for any representations and warranties that address matters only as of a
particular date specifically set forth in the particular representation or
warranty which shall remain true and correct as of such particular date.
(b) The Parent and Purchaser shall have performed and complied in all
material respects (without giving duplicative effect to any materiality
qualification contained in the applicable obligation) with all covenants and
agreements contained in this Agreement required to be performed or complied with
by them on or before the Closing Date.
(c) The Parent and Purchaser shall have deposited with the Exchange
Agent the Deposit Amount in trust for the benefit of the holders of
certificates.
(d) The Parent and Purchaser shall have executed and delivered to the
Company at and as of the Closing a certificate, duly executed by the Parent's
and Purchaser's Presidents and Chief Financial Officers, in form and substance
reasonably satisfactory to the Company and the Company's counsel, certifying
that to such officers' knowledge, the conditions specified in (a), (b) and (c)
have been satisfied.
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(e) As of the Effective Time, the Options set forth in Section 1.7 of
the Company Disclosure Letter shall have been terminated to the Company's
reasonable satisfaction, or the Purchaser shall have agreed to such continuation
and any and all liabilities arising out of such Options.
(f) Company shall have received a fairness opinion from its financial
advisor to the effect that the per share consideration is fair to the holders of
shares of the Company common stock from a financial point of view.
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ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
6.1 Termination. This Agreement may be terminated, at any time prior to
the Effective Time, whether before or after approval by the stockholders of the
Company:
(a) by mutual written agreement of the Boards of Directors of Purchaser
and the Company; or
(b) by either Purchaser or Company:
(i) if any court of competent jurisdiction in the United
States or other United States governmental body shall
have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling
or other action shall have become final and non
appealable; or
(ii) if there has been a material breach by the other
party of any representation, warranty, covenant or
agreement set forth in this Agreement unless such
breach is capable of being cured and is cured prior
to the Closing Date.
(iii) if the Commitments are not obtained within the time
period set forth in Section 3 without opportunity to
cure (provided that subsection (iii) shall cease to
be applicable once such Commitments are obtained, and
for so long as they remain in force).
(iv) if a form of Employment Agreement is not agreed upon
by Purchaser and Bock on or before the date the
Commitments are delivered to the Company.
(c) by Purchaser, if the Board of Directors of the Company or the
Special Committee shall have (i) approved or recommended an Acquisition Proposal
by a third party, or (ii) withdrawn or modified in a manner adverse to Parent or
Purchaser its approval or recommendation of this Agreement or the transactions
contemplated hereby, or (iii) failed to include in the Proxy Statement to its
stockholders such recommendation (including the recommendation that the
stockholders of the Company vote in favor of the Merger) or publicly announced
an intention to do any of the foregoing or (iv) shall have materially breached
Section 4.5 hereof;
(d) by the Company, pursuant to Section 4.5, in the event the Company
has complied with all the provisions of Section 4.5 and has determined to accept
a Superior Proposal; provided that the Company shall have provided Purchaser
with twenty-four (24) hours' prior written notice of the Company's decision to
so terminate (the "Company Termination Notice"). The Company Termination Notice
shall indicate in reasonable detail the terms and conditions of such Superior
Proposal, including, without limitation, the amount and form of the proposed
consideration and whether such Superior Proposal is subject to any material
conditions.
(e) by Purchaser, within ten (10) days of the delivery to it of
financial statements for the period ended December 31, 1999, if such financial
statements reflect financial or operational performance materially and adversely
different than the projections for such period, as set forth in the information
included in Section 6.1 of the Disclosure Letter.
32
(f) by either parent or Company, if the Effective Time shall not have
occurred on or before June 30, 2000, or it becomes manifestly evident that the
conditions to the transaction shall not be satisfied by such date; provided,
however, that the right to terminate this agreement under this Section 6.1(e)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement shall have principally caused, or resulted in, the failure
of the Effective Time to occur on or before such date.
6.2 Procedure and Effect of Termination. In the event of the
termination of this Agreement by the Company or Purchaser or both of them
pursuant to Section 6.1, the terminating party shall provide written notice of
such termination to the other party and this Agreement shall forthwith become
void and there shall be no liability on the part of Parent, Purchaser or the
Company, except as set forth in this Section 6.2 and in Sections 4.2(b)-(f) and
6.3 of this Agreement. The foregoing shall be an exclusive remedy and shall
relieve any party for liability for any and all damages actually incurred as a
result of any breach of this Agreement or otherwise. Sections 4.2(b)-(f), 6.2,
6.3 and Article VIII of this Agreement shall survive the termination of this
Agreement.
6.3 Fees and Expenses.
(a) Except as otherwise provided in this Agreement and whether or not
the transactions contemplated by this Agreement are consummated, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses. The Parent and the
Purchaser understand and agree that, subject to compliance by the Company with
the provisions of Section 4.1, the Company will pay at or before the Closing its
financial advisory, legal and accounting expenses, fees of the Special
Committee, not to exceed $600,000 in the aggregate, including without limitation
all amounts owed to the Company's advisors pursuant to the Engagement Letters.
(b) In the event that the Purchaser terminates this Agreement pursuant
to Section 6.1(c) or the Company terminates this Agreement pursuant to Section
6.1(d), then the Company shall pay to the Purchaser the amount equal to five
(5%) of the total enterprise value reflected in the Acquisition Proposal or
Superior Proposal, as the case may be, or if none is then pending at the time of
termination, the enterprise value reflected in the transactions contemplated
hereby, plus reimbursement of all of the Purchaser's and Parent's reasonable
expenses as liquidated damages (the "Break-Up Fee"). Any such payment shall be
made within five (5) business days after a termination pursuant to Section
6.1(c) or at the time of any termination pursuant to Section 6.1(d).
6.4 [RESERVED]
6.5 Amendment. This Agreement may be amended by each of the parties by
action taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that (i) such amendment shall be
in writing signed by all of the parties, and (ii) after adoption of this
Agreement and the Merger by the stockholders of the Company, no amendment may be
made without the further approval of the stockholders of the Company to the
extent such approval is required by applicable law.
6.6 Waiver. Subject to the requirements of applicable law, at any time
prior to the Effective Time, whether before or after the Special Meeting, any
party hereto, by action taken by its Board of Directors, may (i) extend the time
for the performance of any of the obligations or other acts of any other party
hereto or (ii) waive compliance with any of the agreements of any other party or
with any conditions to its own obligations. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party by a duly authorized
33
officer of such party. Notwithstanding the above, any waiver given shall not
apply to any subsequent failure of compliance with agreements of the other party
or conditions to its own obligations.
34
ARTICLE VII
DEFINITIONS
As used herein the following terms not otherwise defined have the
following respective meanings:
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person. As used in this definition the term "control" (including the terms
"controlled by" and "under common control with") means, with respect to the
relationship between or among two or more Persons, the possession, directly or
indirectly or as trustee or executor, of the power to direct or cause the
direction of the affairs or management of a Person, whether through the
ownership of voting securities, as trustee or executor, by contract or
otherwise, including, without limitation, the ownership, directly or indirectly,
of securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"Indebtedness" means (i) all indebtedness of the Company or any of its
Subsidiaries for borrowed money, whether current or funded, or secured or
unsecured, (ii) all indebtedness of the Company or any of its Subsidiaries for
the deferred purchase price of property or services represented by a note or
other security, (iii) all indebtedness of the Company created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by the Company or any of its Subsidiaries (even though the rights and
remedies of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property), (iv) all indebtedness of
the Company or any of its Subsidiaries secured by a purchase money mortgage or
other lien to secure all or part of the purchase price of property subject to
such mortgage or lien, (v) all obligations under leases which shall have been or
must be, in accordance with generally accepted accounting principles, recorded
as capital leases in respect of which the Company or any of its Subsidiaries is
liable as lessee,(vi) any liability of the Company or any of its Subsidiaries in
respect of banker's acceptances or letters of credit, and (vii) all indebtedness
referred to in clause (i), (ii), (iii), (iv), (v) or (vi) above which is
directly or indirectly guaranteed by the Company or any of its Subsidiaries or
which the Company or any of its Subsidiaries has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss.
"Material Adverse Effect" means any material adverse effect on the
business, properties, assets, results of operations or financial condition of
the Company and its Subsidiaries taken as a whole.
"Person" means any corporation, association, partnership, limited
liability company, organization, business, individual, government or political
subdivision thereof or governmental agency.
"Subsidiary" means, with respect to any Person, any corporation a
majority (by number of votes) of the outstanding shares of any class or classes
of which shall at the time be owned by such Person or by a Subsidiary of such
Person, if the holders of the shares of such class or classes (a) are
ordinarily, in the absence of contingencies, entitled to vote for the election
of a majority of the directors (or persons performing similar functions) of the
issuer thereof, even though the right so to vote has been suspended by the
happening of such a contingency, or (b) are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of the issuer thereof, whether or not the right so
to vote exists by reason of the happening of a contingency.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise,
35
natural resources, severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal property, capital stock,
intangibles, social security, unemployment, disability, payroll, license,
employee, or other tax or levy, of any kind whatsoever, including any interest,
penalties, or additions to tax in respect of the foregoing.
ARTICLE VIII
MISCELLANEOUS
8.1 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by rule of law or public policy,
all other conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
8.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered if sent via telecopier or delivered
personally(including, without limitation, delivery by commercial carrier
warranting next-day delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by similar notice, except
that notices of changes of address shall be effective upon receipt):
(a) If to Company:
Specialty Catalog Corp.
21 Bristol Drive
South Easton, Massachusetts 02375
Attention: Special Committee
With copies to:
Kane Kessler, P.C.
1350 Avenue of the Americas
New York, NY 10019-4896
Attn: Jeffrey S. Tullman, Esq.
If to Parent or Purchaser:
Golub Associates, Inc.
230 Park Avenue - 19th Floor
New York, NY 10169
Attn: Lawrence E. Golub
With copies to:
Lane Altman & Owens, LLP
101 Federal Street
Boston, MA 02110
Attn: Joseph F. Mazzella, Esq.
8.3 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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8.4 Representations and Warranties, etc. The respective representations
and warranties of the Company, Parent and Purchaser contained herein shall
survive until, and shall expire with, and be terminated and extinguished upon
the earlier to occur of (a) the termination of this Agreement pursuant to
Section 6.1 and (b) the Closing Date. This Section 8.4 shall have no effect upon
any other obligation of the parties hereto, whether to be performed before or
after the consummation of the Merger.
8.5 Miscellaneous. This Agreement and the documents delivered pursuant
hereto or in connection herewith (i) constitute the entire agreement and
supersede all other prior agreements and undertakings, both written and oral
(including, without limitation, any agreement or proposed agreement relating to
the timing of execution of this Agreement and the payment of any amount in
connection therewith), among the parties, or any of them, with respect to the
subject matter hereof, (ii) are not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder, other than Sections
4.8 (which is intended for the benefit of the present and former directors,
officers, employees and agents of the Company and may be enforced by any such
indemnified persons), and (iii) the Purchaser and the Parent may assign this
Agreement to their lenders as collateral security; provided, however, that no
such assignment shall relieve the assignor of its obligations hereunder. This
Agreement may be executed in one or more counterparts which together shall
constitute a single agreement.
8.6 Attorneys Fees. If any legal proceeding is initiated by any party
to enforce this Agreement or otherwise with respect to the subject matter of
this Agreement, the prevailing party or parties shall be entitled to recover
reasonable attorney's fees incurred in connection with such proceedings.
8.7 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of Delaware, regardless of the laws that might
otherwise governs under applicable principals of conflicts of laws thereof.
8.8 Non-Survival of Representations and Warranties. The representations
and warranties in this Agreement shall terminate as of the Effective Time or
upon the termination of this Agreement pursuant to section 6.1, as the case may
be.
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
Parent:
GOLUB ASSOCIATES INCORPORATED
By:____________________________________
Name:
Title:
Purchaser:
CATALOG ACQUISITION CORP.
By:_____________________________________
Name:
Title:
Company:
SPECIALTY CATALOG CORP.
By:______________________________________
Name:
Title:
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EXHIBITS
Exhibit A Stockholders Agreement dated December 2, 1999
Exhibit B Form of Company Option Agreement
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